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Lord Goodhart: My Lords, on our amendment the noble Lord, Lord Astor of Hever, began his remarks by saying that, somewhat unusually, he agreed with everything that I had said. Perhaps I may now return the compliment by saying that, on this occasion, I agree with every word that the noble Lord, Lord Higgins, has said.

The Government's arguments for rejecting this amendment are, frankly, inconsistent with their grounds for rejecting our amendment. Our amendment was rejected because of the view that there was no serious burden on employers, or certainly no burden serious enough to require steps to be taken to deal with it. On this amendment, the Government are saying that small employers will object to the payment of tax credit through the wage packet to an extent which will deter them from employing people who claim tax credit. Indeed, the Government have thought it necessary to include provisions in Schedule 3 to deal with employers who do discriminate. Therefore, unless one assumes that small employers are likely to behave in a wholly irrational manner, those two arguments cannot both be correct.

I believe that there is a burden here and a serious risk of discrimination. There is, in practice, as the noble Lord, Lord Higgins explained, a choice for couples--at

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least where there is one non-working partner. In that case, the working partner can agree that the payment is made to the non-working partner. If that is not choice, I do not know what is.

As far as concerns single parent employees, there may be cases--they will not be frequent but, when they happen, they could be considerably distressing--where an employee actually does not want the employer to know, for reasons of privacy, that he or she (usually it will be "she") has family responsibilities. Further, even if discrimination is not a problem and even if the employee does not mind the fact that the employer will know that she is a single parent, she may well be deeply concerned about the possibility of discrimination as regards taking her on as an employee. Discrimination is a possibility, notwithstanding Schedule 3 to the Bill. There may be a genuine fear of discrimination, which leads an employee to want to get the tax credit direct rather than through the wage packet. Certainly a job is better than a right to claim compensation for discrimination under Schedule 3.

Ultimately, the argument is a very short one. If a single parent employee wants WFTC to be paid by the Revenue direct, payment through the wage packet cannot possibly be an incentive; indeed, it could be a disincentive. For those reasons, it seems to me that this amendment is also a thoroughly reasonable one and one which I very much regret the Government did not see fit to accept.

Baroness Hollis of Heigham: My Lords, the noble Lord, Lord Higgins, opened his remarks by suggesting that, as there were only a few people on the government Benches in the other place, the Government should not have won, even though there was a vote. If that is an argument that the noble Lord wants to press, will he now say that no one on his Benches tonight should vote if he were minded to press the matter because they have not heard the argument? If the noble Lord cares to take a vote just from those present who have heard the debate, I would encourage him to do so. Indeed, if we confine it to those present in the Chamber, I am reasonably confident of the outcome. If not, someone will have my guts for garters tomorrow. I do not believe that the noble Lord was serious about his point. He knows perfectly well about the judgment of the House of Commons. They were asked to think again. They have done so; and they gave an overwhelming verdict.

I turn to the more substantive points made by both the noble Lord, Lord Higgins, and the noble Lord, Lord Goodhart. Both noble Lords persist in believing that couples have a choice in this matter but lone parents do not. I am running out of syntax in which to explain this matter. I again remind the House that 51 per cent of the current family credit population are lone parents and 49 per cent are couples. About a quarter of those couples have the female as the main earner. In that situation, if a decision is taken to pay the money to her, the couple have no choice but to have it paid through her pay packet. In that case, the female is in exactly the same position as if she were a lone parent as opposed to having a dependent spouse who happens to be male and living at home. If she is in work and the money is

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going to her, it must be paid through her pay packet. If she is at home and the money is going to her, it will be paid to her at home. The choice concerns to whom it is paid, not how it is paid. If she is in work, she cannot say, "I want it paid to me, but I want it paid at home". She has no choice but to have it paid through her pay packet, just as is the case with a lone parent.

I have used trisyllabic words, bisyllabic words and words of one syllable. I cannot believe that the noble Lords, Lord Higgins and Lord Goodhart, do not understand that point. I regard it as a piece of sophistry when they say that because two people are involved and they can decide to whom it is paid, they therefore have a choice. They have a choice as to whom it is paid but not how it is paid. Therefore, the claim that couples have choices which lone parents do not is not valid.

The noble Lord, Lord Higgins, suggested that no stigma attaches to family credit and therefore it is perfectly reasonable to continue to pay family credit and that it has a high take-up. However, that is not true. Only 79 per cent of those entitled to family credit take it up. It has the lowest take-up of the main income-related benefits. However, some 95 per cent of those on IS claim that benefit, and 97 to 100 per cent of those eligible for housing benefit claim that. Some 90 to 95 per cent of those eligible for CTB claim that benefit. Therefore, in terms of take-up, family credit has always been one of the lowest income-related benefits to be claimed. Although the position has improved somewhat in recent years--the take-up has increased from 69 to 79 per cent--the take-up is well below that of other income-related benefits. The noble Lord picked up the point--

8.30 p.m.

Lord Goodhart: My Lords, I am most grateful to the noble Baroness for giving way. The take-up in terms of the amount of money that could be claimed is, I believe, substantially higher than 79 per cent. I believe that the figure is around 85 per cent.

Baroness Hollis of Heigham: My Lords, expenditure is always higher than the case load. However, about 21 per cent of those who could claim a useful addition to their in-work pay fail to do so. We do not believe that that same failure to claim will arise in connection with WFTC by virtue of the fact that it will be paid automatically through the wage packet.

The noble Lord said that my honourable friend had said that work pays and that we would drive home that message. It is easy for us to be complacent about the details of the social security system. I should like to share with the noble Lord a statistic that shocked me when I read it the other day. I read that 60 per cent of those out of work who claim housing benefit believe that if they enter work they will lose their housing benefit. That is not true. Everyone who has listened to this debate today in this Chamber knows that that is not true. However, the majority of people outside the Chamber believe that it is true. They believe that if they enter work, they will lose their housing benefit. If there is that level of ignorance about the social security system, it is not surprising that lone parents do not claim

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family credit when they are entitled to do so. It is not surprising that they do not realise how much better off they will be in work as compared with being on benefit. If they do not have that information, they will not make an informed choice.

One of the aims of WFTC is to empower lone parents to make an informed choice so that they will know what they can expect to obtain when they enter work as opposed to being on benefit. The noble Lord, Lord Higgins, insisted that family credit was a wage subsidy. That is a little rich as the previous government introduced family credit without the underpinning of a minimum wage. That meant that family credit was a subsidy not to the employee, but to the low-paying employer who knew that he could pitch wages where he liked, knowing that the taxpayer would take the strain. It is precisely because the working families' tax credit is being introduced following the introduction of the minimum wage that we know that no longer will support for low wages be a subsidy and a sweatshop charter, as it was under the previous government.

The noble Lord, Lord Goodhart, said that an employee may not want an employer to know about his or her family responsibilities. I thought that we had discussed this at considerable length in Committee and on Report. Employers will not be able to infer details of an employee's circumstances from the amount of tax credit that is paid. They will simply not be able to "deconstruct" that back to its component parts.

Lord Goodhart: My Lords, I am most grateful once more to the noble Baroness for giving way. I apologise for intervening again. I have made this point several times before. I accept entirely the fact that the employer will not be able to know details of an employee's family situation. However, the employer will be able to know the one absolutely essential feature; namely, that the claimant--the employee--has family responsibilities.

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